Banks remain poles apart over cryptocurrency partnerships

The price of bitcoin is shown in an electronic board of Upbit, a cryptocurrency exchange, in Seoul on Mar. 12. Yonhap

By Lee Min-hyung

Korean banks are poles apart over whether to expand partnerships with local cryptocurrency exchanges amid ever-toughening financial regulations here.

For now, three Korean commercial lenders ― Shinhan, NongHyup and K bank ― have clinched partnerships with major crypto exchanges here. This allows the exchanges to stably operate the business, as their users can transact digital currencies via real-name bank accounts issued by the affiliated banks.

But other major lenders ― such as KB, Hana and Woori ― do not operate the service and remain skeptical over signing partnerships with cryptocurrency exchanges here ahead of the introduction of the so-called special financial information act.

The act does not allow exchanges to operate if they fail to secure real-name bank accounts for their users. The act will take effect after a six-month grace period finishes in September.

But chances remain slim for the banks having a negative viewpoint over such partnerships to change their stance abruptly and clinch ties simply due to the recent bitcoin craze, according to industry officials.

“Lenders are wary of the introduction of the act, as banks may face tougher sanctions if any security concerns are raised from their affiliated exchanges,” an industry source said. According to the Financial Services Commission, banks can issue real-name accounts for exchanges after “making their own judgment” over whether their potential partner exchanges are reliable enough in terms of security.

A few years ago, KB and Woori as well as some state-run lenders issued real-name accounts for local exchanges, but decided not to extend the contract after financial authorities implemented toughened cryptocurrency regulations in 2018. Under anti-money laundering guidelines, banks have to take more responsibility when their affiliated exchanges are exposed to possible cyberattack or other financial accidents.

The lenders are expected to take a wait-and-see approach for the next few months before resuming their partnerships with exchanges.

“Banks can expand their user base through partnerships with exchanges amid an unprecedented cryptocurrency craze here and abroad,” another bank industry source said. “But the lenders that suspended the partnerships are unlikely to change their policies for the time being, as they are afraid of losing more if their affiliated exchanges are mired in a financial fiasco at a time when authorities are reiterating their willingness to toughen regulations and supervision in the wake of banks engaged in a hedge fund debacle last year.”